The shortfall risk is defined as the optimal mean value of the terminal deficit produced by a self-financing portfolio whose initial value is smaller than what is required to replicate a contingent claim. In this paper we look for an explicit expression for it, as well as for the optimal strategy, when the market model is a binomial model with proportional transaction costs. We first study replication of European claims which satisfy suitable assumptions. We then investigate the shortfall minimization problem in a framework very similar to that without transaction costs.
Replication and shortfall risk in a binomial model with transaction costs / Trivellato B.. - In: MATHEMATICAL METHODS OF OPERATIONS RESEARCH. - ISSN 1432-2994. - 69(2009), pp. 1-26. [10.1007/s00186-007-0208-3]
|Titolo:||Replication and shortfall risk in a binomial model with transaction costs|
|Data di pubblicazione:||2009|
|Digital Object Identifier (DOI):||http://dx.doi.org/10.1007/s00186-007-0208-3|
|Appare nelle tipologie:||1.1 Articolo in rivista|